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The Fiscal Front March 2013. Dale Craymer President Texas Taxpayers and Research Association dcraymer@ttara.org. TTARA. - PowerPoint PPT Presentation
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Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The Fiscal Front
March 2013
Dale CraymerPresident
Texas Taxpayers and Research Associationdcraymer@ttara.org
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
TTARA
The Texas Taxpayers and Research Association is a non-profit membership-supported organization of businesses, trade associations, tax practitioners and individuals that endorse sound state and local fiscal policies in Texas. Our members come from the entire range of economic sectors and share a common belief that all participants in our state’s economic system have a stake in and should have a meaningful say in determining its future.
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Recap of 2011
• Expected revenues fell short because of the recession
• Lawmakers faced an immediate $4.3 billion deficit for 2011 (CPA, Jan 2011 BRE)
• Looking ahead to the 2012-13 budget, lawmakers faced a $27 billion shortage (LBB, Fiscal SizeUp, 2012-13)
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Balancing the 2012-13 Budget$ Billions
Item Total
Cut Current Budget $1.2
Rainy Day Fund $3.2
Revenues $5.0
Reduce School Formulas $4.0
Defer Aug State Aid Pmt $2.3
Underfund Medicaid $4.3
Other Spending Cuts $7.0
Total $27.0
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Balancing the 2012-13 Budget$ Billions
Item Total
Cut Current Budget $1.2
Rainy Day Fund $3.2
Revenues $5.0
Reduce School Formulas $4.0
Defer Aug State Aid Pmt $2.3
Underfund Medicaid $4.3
Other Spending Cuts $7.0
Total $27.0
$8 billion
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Things Start Looking Up
• Comptroller raises her estimate of revenues in certifying the 2012-13 budget in December of 2011– $1.0 billion of contingent appropriations
certified– Ending surplus of general revenue funds
estimated at $1.6 billion
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Revised Estimate of 2013 Surplus
Summer 2011 $0.0 billion
December 2011 $1.6 billion
January 2013 $8.8 billion
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Improving RevenuesPrior and Current Estimates of 2012-13 Revenues ($ billions)
Source2012-13
CREJanuary
2013 Rev.Differenc
e
Sales Taxes $51.5 $57.3 $5.8
Severance Taxes $4.8 $7.0 $2.2
Franchise Tax $8.2 $9.2 $1.0
Other Taxes $12.1 $12.1 $0.0
Non-Tax Revenues $11.5 $11.9 $0.4
Total Gross Revenues $88.1 $97.5 $9.4
Rainy Day Fund Reserve ($1.9) ($3.6) ($1.7)
Net Revenues $86.2 $93.9 $7.7
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The Overall Revenue Outlook$ Billions
Source 2012-13 2014-15 Growth Pct
Beginning Balances/Adjmts $1.6 $8.8 $7.2 n.a.
Sales Taxes $57.3 $62.9 $5.6 9.8%
Severance Taxes $7.0 $7.1 $0.1 1.0%
Franchise Tax $9.2 $9.5 $0.3 3.1%
Other Taxes $12.1 $11.8 ($0.3) (2.5%)
Non-Tax Revenues $11.9 $10.6 ($1.3) (11.0%)
Total Gross Revenues $99.1 $110.7 $11.6 11.7%
Rainy Day Fund Reserve ($3.6) ($3.6) ($0.0) n.a.
Net Revenues $95.5 $107.1 $11.6 12.1%
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Key Revenue Estimate Assumptions
Assumption 2010 2011 2012 2013 2014 2015
Personal Income 2.7% 7.8% 4.7% 5.3% 5.1% 5.3%
Sales Tax Growth (6.6%) 9.4% 12.6% 8.1% 2.4% 5.9%
Price of Oil $72.75 $87.91 $91.96 $85.00 $82.18 $80.33
Nat Gas Price $3.91 $4.09 $3.51 $3.10 $3.68 $4.04
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
General Revenue Funds Available
Item House
Revenue Available $107.1 billion
2013 Supplemental ($4.8)
Undo School Deferral ($1.8)
Net Revenue Available $100.5 billion
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The Senate and House BudgetsGeneral Revenue Discretionary Funds ($ Billions)
Area 2012-13Senate2014-15
House 2014-15
Health & Human Svcs $27.6 $28.4 $28.8
Public Education $39.1 $40.6 $40.5
Higher Education $12.5 $12.2 $12.1
Public Safety $8.3 $8.5 $8.5
Other $4.3 $4.8 $4.8
Total $91.8 $94.5 $94.7
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Foundation Program FundingGeneral Revenue Funds Only
2012-13 Budget Base $29.0 billion
2014-15 Budget Introduced $29.0 billion
Net Increase $0.0 billion
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Foundation Program Elements
Cost of Enrollment Growth $2.2 bLess: Local Property Taxes ($1.5 b)
Change in “Settle-Up” ($0.9 b)Plus:
Deferral Adjustment $0.3
Net Increase to Public Schools $0.0Note: Numbers may not add due to rounding.
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The Senate and House BudgetsGeneral Revenue Discretionary Funds ($ Billions)
AreaSenate2014-15
Subcom Recomd
Chair’s Instruct
Health & Human Svcs $28.4 +$2.5 +$1.7
Public Education $40.6 +$1.5 +$1.5
Higher Education $12.2 +$1.0 +$0.7
Public Safety $8.5 +$0.3 +$0.2
Other $4.8 +$2.8 +$0.3
Total $94.5 +$8.1 +$4.4
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The Senate BudgetGeneral Revenue Discretionary Funds ($ Billions)
Area 2012-13Senate2014-15 Increase
Health & Human Svcs $27.6 $30.2 +$2.6
Public Education $39.1 $42.4 +$3.3
Higher Education $12.5 $13.2 +$0.7
Public Safety $8.3 $8.9 +$0.6
Other $4.3 $5.1 +$0.8
Total $91.8 $99.7 +$7.9
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Texas Spending LimitTexas Constitution Art. 8 Sec 22
Sec. 22. RESTRICTION ON APPROPRIATIONS. (a) In no biennium shall the rate of growth of appropriations from state tax revenues not dedicated by this constitution exceed the estimated rate of growth of the state's economy…
(b) …the legislature by adoption of a resolution approved by a record vote of a majority of the members…may provide for appropriations in excess of the amount
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The Spending Limit
• LBB, as required by statute, adopted a spending limit based on personal income growth of 10.7 percent
• The limit requires a complex cross-walk calculation because the limit applies to only a portion of state revenues (see Texas Register, November 9, 2012)
• The limit will be adjusted as revenues and appropriations shift
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The Spending Limit
• Is a very real constraint this session• It will be challenging to stay under the
limit:– Ultimate costs of Medicaid are likely to be
higher than what is in the final budget, and– Public Education may look for additional funds
to resolve school finance lawsuit– Funding the State Water Plan from the Rainy
Day Fund?
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Rainy Day Fund Record
• The Rainy Day Fund is projected to have a record ending balance at the end of fiscal year 2015:
$11.8 Billion
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
The “Rainy Day” FundTexas Constitution, Article 3, Section 49-g
• Four ways money goes into the fund:– 50% unencumbered biennial cash balance– 25% oil tax money over 1987 collections– 25% natural gas tax money over 1987 collections– Any other amounts appropriated by the Legislature
• Balance may not exceed 10 percent of general revenues from previous biennium (excluding interest, investments, and interfund borrowing)
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Spending the “Rainy Day” FundTexas Constitution, Article 3, Section 49-g
• A 3/5 vote (members present) is necessary to…– fund existing appropriations to the extent
existing revenues projected to fall short– fund prospective appropriations up to the
amount of money in the previous budget• A 2/3 vote (members present) is
necessary for any other circumstance
Texas Taxpayers and Research Association March 2013
www.ttara.org
(512) 472-8838
Thanks for Joining Us!If you have any questions or
comments, please feel free to contact TTARA staff.
Dale Craymer dcraymer@ttara.org
John Kennedy jkennedy@ttara.org
Sheryl Pace space@ttara.org
George Christian gchristian@ttara.org
Ryan Ash ryan@ttara.org
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